Published on January 10th, 2017


India renews efforts to build LNG ships

The government is renewing efforts to build technologically-advanced and sophisticated LNG ships locally under the Make in India program of Prime Minister Narendra Modi after two attempts to push through with the plan faltered for various reasons which suggested that India needed to walk the extra mile to achieve the goal. “Fresh initiatives are being taken at the highest level to explore the possibility of Indian stakeholders assuming the perceived risks on Indian-built LNG ships,” a source said, indicating that for the first the government was open to taking on these perceived risks in the larger interest of the country’s progress into a niche shipbuilding segment now dominated by Japan, South Korea and of late China. “Workable solutions for building LNG carriers in India are being explored,” the source said. India dithered on taking over the perceived risks arising from the operation of LNG ships to be built for the first time in India, a demand put forward by some of the world’s top LNG ship owners and operators who had applied on a tender, the second, issued by state-owned GAIL (India) Ltd for hiring as much as nine new LNG ships on long term contracts to transport gas from the United States. The indecision led to the closure of the tender on 15 October. “The government is studying the long-term impact/advantages of indigenous LNG vessel construction vis-a-vis the risks involved. Based on the findings, the government will look to support building of LNG ships in India under the Make in India program,” the source mentioned earlier, said. Once, the issue of assuming the operational risks on Indian-built LNG ships is addressed by the end of the month, GAIL is expected to re-issue the tender, the source said. GAIL will not order the ships directly at shipyards-both overseas and Indian. It plans to hire the LNG carriers from global fleet owners who will have to construct three of the nine tankers in India as part of the ‘Make in India’ plan. On 15 October, GAIL decided not to extend the validity of the bids received from two separate bidding groups in March to hire the LNG ships. Seven of the world’s top LNG ship owners formed two separate consortia to put the bids. These include a consortium of Mitsui O.S.K. Lines Ltd (MOL)-Nippon Yusen Kabushiki Kaisha Ltd (NYK Line) and Mitsui and Co. Ltd and another group comprising Mitsubishi Corp.-Kawasaki Kisen Kaisha Ltd (K Line)-GasLog Ltd and Foresight Ltd. The lucrative LNG ship construction business is expected to gain traction as nations go for clean fuels such as LNG to reduce their carbon footprint to align with the goals of the Paris agreement on climate change. It will also boost the profile of Indian yards and help them move up the value chain. Shipping industry executives say that India should fast track the GAIL tender and finalize the plan to build LNG ships locally without further delay. The ship chartering contract, estimated worth $7 billion, involve hiring nine new LNG tankers for shipping 5.8 million metric tonnes per annum (mmtpa) of gas from the US.

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